PetMed Express (NASDAQ:PETS) Has Affirmed Its Dividend Of $0.30
PetMed Express, Inc. (NASDAQ:PETS) will pay a dividend of $0.30 on the 27th of February. The dividend yield will be 6.0% based on this payment which is still above the industry average.
See our latest analysis for PetMed Express
PetMed Express Is Paying Out More Than It Is Earning
If the payments aren't sustainable, a high yield for a few years won't matter that much. Before making this announcement, the company's dividend was much higher than its earnings. It will be difficult to sustain this level of payout so we wouldn't be confident about this continuing.
Over the next year, EPS is forecast to expand by 140.1%. Assuming the dividend continues along recent trends, we think the payout ratio could reach 96%, which probably can't continue without putting some pressure on the balance sheet.
PetMed Express Has A Solid Track Record
The company has a sustained record of paying dividends with very little fluctuation. The dividend has gone from an annual total of $0.60 in 2013 to the most recent total annual payment of $1.20. This implies that the company grew its distributions at a yearly rate of about 7.2% over that duration. Dividends have grown at a reasonable rate over this period, and without any major cuts in the payment over time, we think this is an attractive combination as it provides a nice boost to shareholder returns.
The Dividend Has Limited Growth Potential
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. However, things aren't all that rosy. Over the past five years, it looks as though PetMed Express' EPS has declined at around 20% a year. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future. On the bright side, earnings are predicted to gain some ground over the next year, but until this turns into a pattern we wouldn't be feeling too comfortable.
PetMed Express' Dividend Doesn't Look Sustainable
Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. We can't deny that the payments have been very stable, but we are a little bit worried about the very high payout ratio. We would be a touch cautious of relying on this stock primarily for the dividend income.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. To that end, PetMed Express has 2 warning signs (and 1 which shouldn't be ignored) we think you should know about. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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